Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/208220 
Year of Publication: 
2018
Series/Report no.: 
ECB Working Paper No. 2186
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We provide evidence that liquidity premia on assets that are more relevant for private agents' intertemporal choices than near-money assets increase in response to expansionary forward guidance announcements. We introduce a structural specification of liquidity premia based on assets' differential pledgeability to a basic New Keynesian model to replicate this finding. This model predicts that output and inflation effects of forward guidance do not increase with the length of the guidance period and are substantially smaller than if liquidity premia were neglected. This indicates that there are no puzzling forward guidance effects when endogenous liquidity premia are taken into account.
Subjects: 
Forward guidance
Unconventional monetary policy
Liquidity premium
JEL: 
E32
E42
E52
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3291-2
Document Type: 
Working Paper

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